Theatre chain defies the naysayers

Written by Shirley Lichti for The Record, February 20, 2008

"Cocooning" is a term that was coined in the early 1990s by trend forecaster and marketing consultant Faith Popcorn, who predicted North Americans would retreat to their safety of their homes to protect themselves from the harsh realities of the outside world.

Many people speculated cocooning would result in the demise of the movie industry as consumers invested in home theatres and stopped going to cinemas.

It wasn't the first time that naysayers had prophesied doom for the industry. For example, when colour TVs first began to appear in people's homes, pundits sounded the alarm. But marketers responded with strategies to counter a potential downturn, introducing widescreen films, an experience that could not be replicated at home.

Today the movie industry still faces challenges, evidenced by the lack of blockbusters in the recent holiday season.

Yet, while movie attendance in North America was flat in 2007, Canada's largest theatre chain, Cineplex Entertainment, reported an increase of 6.5 per cent. Concession sales and advertising revenues saw double digit increases, and full year profits tripled.

Like other service-based businesses, Cineplex must deal with unique marketing challenges: its services are both intangible and perishable.

Cineplex has tackled the first challenge by making the theatre experience more tangible. Complexes were remodelled to upgrade the physical environment with better projection and sound systems, more comfortable seating, and non-film activities such as video games.

According to Georgia Sourtzis, Cineplex's manager of communications, "While our primary goal will always be film presentation, we have amazing real estate. We want our film complexes to become entertainment destinations." She emphasizes "we are looking at bringing in alternative events and shows that our guests want."

Sourtzis cites a new cinema in Oakville as one example of how this strategy is being implemented. The 45,000 square foot facility hosts 12 screens, plus a six-lane bowling alley, billiards, party rooms, a Kids Club, babysitting services and private VIP rooms.

Cineplex has also launched a loyalty program, Scene, in partnership with Scotiabank. Members earn points that can be redeemed for tangible rewards such as tickets to movies and concession-stand products.

Scene is a hit. Ninety per cent of the membership target was reached in the first six months. In just one year, over 600,000 people joined the program.

Perishability is another big issue for Cineplex. Unlike product-based companies, theatres cannot store their services in inventory. A theatre that is only half full on Monday night means permanently unrealised revenue.

In the 1980s, movie theatres dealt with perishability by launching $2.50 Tuesdays, which helped shift demand away from more popular weekend screenings.

Today Cineplex maximizes capacity through alternative program offerings that bring in new audiences, smooth out demand, and boost revenues.

It introduced professional wrestling about five years ago, followed by World Cup soccer and NHL games. Diehard hockey fans can see a Toronto Maple Leafs' game for $10.95, a fraction of the cost to take in a game at the Air Canada Centre.

Increasing the usage of its facilities has not been limited to sporting events. Cineplex has also broadcast live concerts by David Gilmore and Bon Jovi on a pay-per-view basis.

Last year it began transmitting live performances of the Metropolitan Opera from New York. Although the original plan was to screen operas in 12 major cities in Canada, demand was so brisk - 50,000 tickets sold in the first two weeks - that more cities were added.

Sourtzis says that sales and feedback were phenomenal, so this year operas will be shown in 70 theatres. Patrons shelled out $17.95 to take in productions such as Tan Dun's The First Emperor and Tchaikovsky's Eugene Onegin. Considering that top tickets to the Metropolitan Opera in New York sell for $295, it was a bargain.

More importantly, Sourtzis notes that opera performances have allowed Cineplex to reach a "demographic that never goes to the movie theatre but are now starting to come to see films."

Late last year, the company presented a digitally enhanced version of The Beatles' 1965 film, Help! It was extremely well received according to Sourtzis. Shown on a Monday night, it made efficient use of facilities, brought in audiences who had not been to the theatre in a while and introduced younger audiences to a classic movie.

In the future you may even be able to see Broadway productions in movie theatres. Pat Marshall, vice-president of communications and investor relations for Cineplex, has been quoted as saying she would love to see this happen.

The movie industry will undoubtedly face more challenges, but with innovative marketing strategies, Cineplex should ensure "It's Showtime" for years to come.

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